Interview: La Compagnie Co-Founders Frantz Yvelin And Peter Luethi

Since launching its Paris-Newark service this summer, all-business-class carrier La Compagnie has met its share of skepticism, given the failures of the model by most prior transatlantic entrants. Co-founders Frantz Yvelin—who also founded L'Avion, the only all-premium-class transatlantic carrier launched during the last decade that did not fold—and Peter Luethi are confident that their model of business-class-level service and seating at a price point between economy pricing and business-class pricing on legacy carriers will be sufficient to sustain and grow La Compagnie. Yvelin and Luethi on Oct. 1 spoke with BTN's Chris Davis and Michael B. Baker about the carrier's first months, its progress in gaining corporate market share and what differentiates La Compagnie from earlier models that failed in the space. Excerpts follow. 

How have your first months of operation fared?

Frantz Yvelin: We made our maiden flight on July 21. Since then, we have operated almost 100 flights, and since mid-August, 100 percent of the flights have been on time or ahead of schedule. Load factors are going pretty well. The passengers are happy. You had the choice before La Compagnie of two kinds of horrible pains: the physical one if you were traveling in coach class, or the financial one if you were traveling in business. We are solving the equation. With us, you can travel in a very affordable way in a high level of comfort on board. We provide true business-class service for two to three times cheaper than the other. We are proud and happy of these first results, but these are just the first ones. We're going to go further and expand. Our second plane is going to be delivered to us a few weeks from now, and we are going to expand more activity.

What's your current frequency?

Yvelin: We are six days a week. We operate 12 flights a week, every day but Tuesdays. Tuesdays are going to be launched probably early 2015.

What will you do with the second plane?

Yvelin: The second plane is being delivered at the end of November, and of course it has to reflect the first one, so we have some work to be done on it. The decision has not been made yet as to what to do with this plane, and it will probably be announced in November and December.

Will you look at other transatlantic options, and in the long-term, look at other routes within Europe or to Asia?

Yvelin: Europe-to-Europe, the answer is no. This kind of product makes sense only on flights longer than three hours, and I don't see any interest for flights less than five hours. When I fly below five hours, I fly coach, and a lot of people do. Do I see interest in other routes on the North Atlantic? Yes, there are plenty of routes in that category, and 85 percent-plus of seats being offered between Europe and North America are being offered by the alliances. You have three alliances: Star, Oneworld, SkyTeam, and that's it. As soon as you stimulate the market, you stimulate the demand. That is true even for premium traveling. Paris-New York is a big market, but there are several other Europe-U.S. routes that fall into that scope. Europe to other places and the United States to other places, I also think so.

Will you be working with corporate travel buyers?

Yvelin: We want to be accessible to the global distribution systems who are the links to the corporations being able to find us, either through Expedia or their travel agency. This was supposed to be activated at the end of August, but for technical reasons it wasn't; but it will be activated [this month]. All travel agents and corporations in New York and Paris will be able to access us through the indirect channels, and that's very important for the corporations in particular. We'll start with Sabre, then Amadeus and Travelport and Worldspan.

What about contracting with corporations?

Yvelin: Any company who has significant traffic between Paris and New York should be contacting us, or we should be contacting them. That's being done. We have a sales team here in the United States and in France dedicated to corporations, and we are talking to a lot of them already. Even though it was not the priority to talk to the large corporations, because we know they have existing agreements, they already are starting to try us.

Peter Luethi: There's no sense for us to go after an IBM, but to go after the IBM business segment in France. The companies that do business with France are our main targets.

Conceptually, would the structure of deals be typical: a discount for level of share or volume?

Luethi: [This ties into] frequent-flyer programs. If you look at the corporation as a corporation, we are not dealing with the same concept as a frequent-flyer program. We fly at the moment to two cities. The traveler doesn't want to go back to Paris; he or she might want to go to Hawaii. So, we will approach this in a different way. You don't see any frequent-flyer program being given to the companies; it's always to the individuals. We have the choice; you can do it either way. If you have a group of 10 lawyers from the same firm traveling, we have a very flexible thing for them that will help the 10 lawyers rather than the individual who travels. The frequent-flyer program will be a frequent-segment program that will serve more the business than the individual. This is a new approach that can only be done with a small airline. That's where we will be able to satisfy some of the big businesses.

Will that be a standard offering or something you negotiate with every client?

Yvelin: Right now, the technology gizmo is not implemented, so we know a passenger is flying and keeping a record of their flights, and as soon as they reach X flights, they get one flight free. We look at it as similar to the JetBlue approach, which means we are not going to interface it with other actors and keep it inside the airline and for the airline. We are specialists, where the others are generalists.

Luethi: We have excellent examples in this country: Southwest and JetBlue. As soon as you go into the bigger complexity, in the alliance world, it is so complicated. They try to make it easier for the customer, but behind the scene, it's so complex. The perceived revenue you gain is far less than what you expected on your own cost base.

As you've talking to corporations, has the subject of their policies and business-class travel restrictions come up?

Yvelin: Most of the restrictions we are observing right now are linked to flights of less than five hours or three hours. For most corporations, long-haul travel means you can get business class, but this is so painful in terms of price for them, of course they are welcoming like fresh air people like us coming in.

Luethi: We had some discussions where this point came up. Our argument was basically that you could have a policy that if you fly business to Paris, you can fly La Compagnie. Don't classify it in a specific class; specify it as an option in the travel policy.

Yvelin: At least one of our first corporate clients made it very clear with their employees: Long-haul, it's coach class on Air France or business class on La Compagnie, and that's it. A lot of employees of this company said, "I'm Gold Medallion status and will get a free upgrade," but it didn't work, or it worked once, and then they enjoyed the back of the plane. Then, they tried us, and said, "It's not too bad; it's actually very good."

Why do you think La Compagnie will succeed where others have failed?

Yvelin: I have founded the only business-class airline that actually made it in the past. L'Avion was a tremendous success. With the other ones, you had three: Silverjet was British, and Eos and Maxjet were American. Considering Silverjet, the airplane was a bad one: 767-200, which burns a lot of fuel. They were not cost-conscious at all, and you have to be cost-conscious in this industry if you want to succeed. They had 120 seats aboard a 767-200, and the cost was too high to make it run a proper way. Maxjet was another story. They opened Washington-London and closed it several times. You can do that once, perhaps, if you're very good at talking to get them back. You can't do it twice, and Maxjet did it three times. I tried it and was sincerely disappointed by the level of service and quality of food. They were doing maintenance by themselves, which was a mistake. We have chosen to do maintenance with a reputable actor in the airline industry. Maxjet also was 100 percent Internet-based, which was a mistake. When you talk to business-class travelers, you have to be able to talk to the agencies and GDSs, because those are partners for you. Considering Eos, it was the exact opposite. It was successfully able to demonstrate, doing five flights a day between London and New York, that there was a market for an all-premium carrier, but the main problem was the business model was the wrong one: to provide first-class for the price of business. The market share is way too small. The price difference was not big enough, and the legacy carriers were in the position with their revenue management systems to shoot and kill. The product onboard Eos was a good one, and everybody who flew it would tell you that, but the cost structure was not appropriate.

What are some things that you learned and had to change during these first months?

Yvelin: We learned a lot of things. We were wrong on the tea choices. We were only providing Lipton tea, and they wanted something better, so we changed the teas. We learned from the beginning and the first feedback stupid stuff—like we were providing toothbrush and toothpaste in the toilets, which seemed logical, but some passengers wanted it included in the amenity kit. Soon we'll be able to activate a mood-light LED system, recreating a sunrise. We have improved the breakfast service between New York and Paris. There are little details, which we are walking out in a permanent way.

There were some criticisms of the services online after the first flights.

Yvelin: There has been only one, which came from a blog. I was shocked that some blogger took the train from Belgium to travel on one of the initial flights and then started to compare our product with premium-economy products from other airlines. If you want to travel the lovely economy-plus seats on other airlines, go for it, or you can travel business with us, or you can pay $6,000 for a roundtrip with other legacy carriers. The new Air France business product is a good one, but are you ready to pay $6,000 for it, or would you prefer to pay $1,499 with us? That's where we stand.

I never pretended to provide the best business-class service in the skies. There are some others which are pretty good service, but the price is a big barrier. We are a niche player in a niche market, and what we are providing is one of the best business-class services in the skies between Paris and New York right now, and it is by far the more affordable. I see criticism about the seat, whether it's fully flat, both seats are at an angle of 180 degrees. It's slightly angled, and it's exactly the same as what you'll find on Air France right now, except one airplane being equipped with the new business class. The 380 doesn't have it and won't have it before 2016. Premium-economy customers are buying for a very high amount of dollars or euros an economy seat. They don't have lounge access or fast-track access. And how about the luggage restrictions? With us, you can take two bags free. That's not the case with an economy-class product. Our plane is equipped with 74 seats, 74 beds. Compare that to 300-400, or even the smaller ones with 170 seats. Try one of those, and stay in the queue for 45 minutes. Try us, and you'll see how quiet the cabin is.

I have a lot of respect for Pan Am in the old days. A lot of our passengers say it reminds them of Pan Am, and we want to bring back that quality of flight in the end, the same as it was a few decades ago.